All Forum Posts by: Justin Moy

I think the bookshelf looks better and people will put more than books on it too if they don't have any so it will get decorated. 

I'd ask a property manager in the area. Ask 3 or 4 companies that work with the size and type of deals you're analyzing and you'll likely pick up some themes. 

Use those for your analysis. 

These can be used for things like payroll but will get trickier when talking utilities or repairs & maintenance as a lot of those have to do with how old the building is or what condition it's already in

Some markets are better for cash flow. Boston from what I've heard is very tough with compressed cap rates. Some investors are comfortable buying for appreciation or with the expectation that rents will grow at a faster pace. Either through value add or naturally. 

I agree with you though I'm not willing to buy a short term liability in the hopes it will appreciate. 

If you want more cash flow deals you may want to look outside of Boston and test out some new markets where you're hitting closer to the range of returns you're looking for. 

I'm not a fan of buying a short term liability (no cash flowing property) in hopes of long term gain through appreciation. 

I'm also not a fan of the 100% leverage on any deal. I don't go above 70% generally and prefer mid or low 60s. 

If you have to "make" the numbers work, then it's likely not a deal you want to do. 

Great deals are hard to find, that's what makes them worth the trouble. If you're having a hard time finding good deals, that's normal. 

Others have pointed out the active vs passive route with the cash you're using. 

Passive positions could be your answer from both a necessity perspective and also solving for investing wisely outside of your home state if you choose an operator correctly. 

A lot of investors in CA invest in a syndication structure for getting local knowledge and management in a more investor friendly area

The 83% occupancy is going to hurt your loan options. It also sounds like this is a newer venture for you so unless you have a key partner with experience banks will also factor that into their loans. 

On the bright side, a lower LTV will decrease the risk of the project for you so it's a good buffer to have on your first deal

I'd get a real estate lawyer and tell them the structure and partnership you want to create. They will ask you a lot of questions about how things will be structured within the group and write up your legal docs. 

You will likely create an llc you will all be owners of. % of ownership will be part of the conversation you have with the lawyer. 

As far as capital goes, those will be written in the legal docs as well if there are requirements of capital contributions, if so how much, who is responsible for what. If one partner is more capital intensive vs others all that will be spelled out. 

I'd give the seller a few options. It sounds like the deal is more enticing and therefore more valuable if they can deliver a unit vacant. I'd look at when the next unit lease expires and you can either...

Delay closing until it's expired and vacant

Give them another offer that's less enticing to not deliver the unit vacant

When it has to do with financing the playing field is pretty level, every buyer will be able to get more competitive with a vacant unit

If they are MTM you are free to increase or modify their lease terms. The thing with 4 plex tenants is they talk right away, so when one gets a hint you're raising rents they'll tell the others. 

Keep that in mind as you'll want to treat all the tenants the same instead of potentially raising one persons rent more than the other. 

Overall I'd be transparent with the plan and give them a few options. They can continue living in their classic units for $X amount per month and you can agree to slowly raise it over time. 

Or they could potentially agree to a live in renovation and renew at a higher rate. 

Just be transparent and give them a flexible timeline, then be ready to move fast because my gut tells me they'll all move out pretty close to each other

My advice would be to have more cash. Idk who told you to never use your own money to invest in deals but I think that's horrible advice. If you don't have a healthy amount of cash then you're adding a lot of risk to the deals you do. 

Yes you can raise money for deals and you put in the sweat equity in exchange for cash. Being a bit newer in the space will come with some challenges there but it's possible for sure. 

If the property you're thinking of tapping into equity for is the one you listed, you bought for $495 and you owe $450 on it, unless it has appreciated quite a bit I don't think you have enough equity in there to pull from. 

Sounds like the options are to either raise private money, or pump the brakes and save up a bit more in both cash and equity.